With $70M from Alphabet, United Masters replaces record labels

The records labels are obsolete. They haven’t kept up as music evolved from selling CDs to streaming songs to promote concert tickets and merchandise. Labels were meant to help artists generate albums, fame, and money. But now anyone can record themselves and no “buys” music. So today that requires being a technology company, combining analytics with hyper-targeted advertising. And the old labels don’t have the engineering talent for it.

That’s why last year, the former president of Interscope Records Steve Stoute secretly raised $70 million from Google parent company Alphabet, prestigious venture firm Andreessen Horowitz, and entertainment giant 20th Century Fox.

United Masters is ready to give musicians an alternative to exploitative record label deals. Artists pay United Masters a competitive rate to distributes their music across the internet from Spotify to YouTube to SoundCloud, and they split the royalties while the artist retains the rights to the master recordings. Then United Masters sucks back in all the analytics, identifies the listeners, builds artists a CRM tool, and helps them target their top fans with pinpointed ads for tickets and merch.

Stoute explains that the plan is to “Look at music like gaming. You monetize the game to all the people who are most engaged. I wanted to bring that theory and thinking to music.” It’s off those whales, those super fans, where musicians make a lot of their money. And finally someone built a way to deliver ads for what artists do sell to people who’ve listened to their album 50 times for cheap.

The startup world’s biggest rap fan Ben Horowitz is so smitten with the idea that he’s joining the board of United Masters. “Steve thought: What if there were a platform that instantly enabled musical artists to market themselves globally as effectively as the top technology companies market to their customers?” Horowitz wrote in a forthcoming blog post shared with TechCrunch. “Such a platform would free musicians from dependencies on the old model while increasing their income tenfold. It would create unprecedented intimacy between artists and fans, while making artists truly independent.”

It was Larry Page himself that pushed Alphabet to lead the startup’s $70 million Series A. “People don’t know Larry was actually a drummer. He has a deep sensitivity for the artist” says Stoute. Page was stunned that artists couldn’t keep track of the fans that bring in the most cash and retarget them. So Page worked with Google’s Corp Dev leader David Drummond, a former radio DJ, to invest in United Masters all the cash it needed.

The Google family is quite gungho about upending the recording industry. The first investment of GV (Google Ventures) was Kobalt, a music distribution and rights service. It’s raised over $200 million to track to publish artists’ work and track down royalties, but Kobalt stops short of helping them market their tours and t-shirts.

Stoute has already been working on an ad agency for culture makers called Translation since 2004, and the company will join United Masters as part of Translation Enterprises. Musicians trust him unlike some technologists. Born in Queens, NY, he used to manage local heros Nas and Mary J. Blige, turning them into icons. Talking to him, you get the distinct sense that he’s fed up with seeing other musicians get screwed over. He refers to United Masters more like a movement than a mere software company.

Music Tech Is Inevitable, Not The Enemy

The first iteration of United Masters is now operational, allowing artists to connect their YouTube or SoundCloud accounts to the site and in return receive “personalized guidance on how you can grow your career”. That could include insights into fan demographics or where to route tours.

United Masters is now actively recruiting both tech talent in product, design, and engineering; and its first wave of independent musicians, and is already working with around 1000 acts. It’s focused on emerging artists first who want to be digital natives in how they run their business.

But evententually, it could sign established artists who want to ditch their label deals, bet on their long-term potential, and retain control of their original recordings. Instead of a cash advance, a leash, and a sliver of the revenue, United Masters acts as a partner.

Now labels often want a cut of all of the artists’ revenue streams. “Label started doing 360 deals because they margins were drying up [as CD sales declined], but they weren’t providing a 360 service” Stoute chides. “I’m not making the records labels the ‘bad guy’” he qualifies, but declares “The models have to change.”

There are already services like TuneCore for pushing music to the streaming services, and each of them is trying to woo musicians by providing more analytics. Spotify just launched a whole insights app for artists. There are plenty of merchandise platforms and ticket partners to choose from. But United Masters wants to be the missing data layer for the music business. That could allow it to find a huge fan on of an artist on Pandora earning them just fractions of a cent per stream, retarget them with ads on Facebook, and get them to buy a signed poster or front row ticket package.

Educating artists that there’s another path could be United Masters‘ biggest challenge. Many musicians still think streaming is the enemy, cannabilizing their album sales, rather than as the inevitable progression of music distribution that can serve as marketing for their band as a brand. But once artists see that they’re not much different than Nike and their songs are like commercials, they realize they need help getting listeners to turn their passion into a purchase.

“It’s very important that an artist’s jobs is to be a great artist” Stoute concludes. “The infrastructure around them to should be helping them get more money at efficient rates, not owning their masters and taking from them.”